How Do We Expect Qualcomm’s QCT Segment Revenues To Grow In The Next 5 Years?

We expect Qualcomm’s Chipset segment (QCT) revenues to decline by approximately $800 million in the next five  years. At present, the segment accounts for about 68% of the company’s overall revenues and this figure is expected to reach 72% by 2021, which is essentially because we expect the company’s licencing segment to see a larger decline in revenues during this period. We believe that Qualcomm’s modem chipset prices will decline at a steep rate going forward, offsetting the impact of the increase in the number of chipsets sold, which will eventually lead to a drop in QCT segment revenues.

Incentive For Qualcomm To Reduce Chipset Prices

Qualcomm’s chipset prices have come under pressure, as mobile phone makers, especially in emerging markets such as India and China, are looking to reduce mobile phone prices to stimulate demand. Further, an increasing number of Chinese companies such as Huawei and Xiaomi have started manufacturing their own chipsets to benefit from the fast growth in the penetration of 3G and 4G technologies in these emerging markets. Qualcomm is also facing strong competition from its rivals such as MediaTek and Apple in the Application processor market. According to reports, Apple and MediaTek held 21% and 19% of the Application Processor market in 2015. Even Samsung has built in its own Exynos series of processors, which were used in its high end phones such as Galaxy S6, replacing Qualcomm’s Snapdragon 810. Going ahead, we can expect more smartphone makers to come up with their own processors to cut down device costs and improve their margins. Qualcomm therefore has a big incentive to keep reducing the chipset prices in order to maintain its market share and gain more traction in emerging markets.

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